Thursday, March 12, 2009

Did only I forget that neocolonialism is alive and well?

During a discussion group tonight, I got the strange feeling that I was being given a sales pitch from Bizzaro World: Chevron is not just an oil extraction company, it is a development partner.

Don't get me wrong, it could be a reasonable view. The official topic of the discussion was the importance of public-private partnerships for development, which sounded interesting enough. I should have been skeptical though when I realized that a suggested reading was a Klaus Schwab piece in Foreign Affairs entitled Global Corporate Citizenship, which argues that "companies depend on global development, which in turn relies on stability and increased prosperity, it is in their direct interest to help improve the state of the world". Along with Creative Capitalism, an term invented by Bill Gates only when he was no longer CEO of Microsoft, PPP, as it is called, is the idea that businesses have a stake in development, and so need to help move it along.

Over a beer in a dark and noisy bar, this idea may sound great, until one realizes that businesses exist for profit only, not the social and economic development of local communities. So, when Schwab says that "as state power has shrunk, the sphere of influence of business has widened", we should be sufficiently concerned that not only do businesses not care about social welfare, recent history suggests they're not very good at managing their own risks and portfolios.

So, in theory the discussion was bound to be a bit worrying. In practice, I now feel that I need a good shower to wash away my own guilt. Instead of an open discussion about the role of business in development, we got a sales pitch for how great Chevron is, from both Chevron and a World Bank representative, who called Chevron "one of the finest companies on the planet".

In reality, the discussion mostly entailed me staring blankly at the ridiculous things being said unquestioned about extractive industries in Africa. Only their own words can do justice to the insanity:

The Chevron rep began by complaining that NGOs give him too hard of a time when Chevron demands a voice in the implementation of development programs at their financial assistance. I then asked why Chevron thinks they have the necessary skills to add to the already noisy debate about how to use aid, and whether any NGO should believe its more than a PR stunt. His answer was that they have a number of development specialists on staff, and that the development of local governance in Nigeria oil regions is important for business, and thus the local communities. Somehow, we are meant to assume Chevron cares about the little people. There was no answer for the PR question.

I then brought up the problems of extractive industries for social and economic development of women and minority groups, but personal stories were presented that suggested all of this work is somehow false. I am told I will get an email detailing these stories.

An NGO representative then made a long and impassioned argument for businesses role in development, starting from the assumption that Chevron is right to support local government, even at the exclusion of the federal government, because "supporting local government is the best way to develop". This of course reminded me of the Bill O'Reilly style of argument: start from a false premise, then quickly build an argument that is self-evident. So I asked innocently "who is to decide how to build local government, the people, or international organizations". Her answer was that local people should be brought into the debate, though we don't know how Chevron is doing this since the specifics of their programs are never given. To be honest, there is no real answer to this question, but it is important to remember that we can't just assume an international business has the right answers.

When asked about how conflict of interest can be important in businesses role in development, the Chevron representative said that "conflict of interest is a micro problem", suggesting that corporate conflict of interest is not a big deal, but it only matters at the local level, mostly through corrupt governments. I am sure no reader of this blog can think of examples, both within oil and in other industries, were the conflict between profits and local development has been a problem. (more to come on this)

The World Bank rep, as is the common mistake of most economists, said that "only economic development matters". I'm sure that is of great comfort to minority and disenfranchised groups (such as women) that suffer from extractive industries.

Another NGO representative made the argument that the PR issue is not such a big deal, since it is not what people in developing countries think that matters, but how local communities feel about the problems. The problem is though, faced with an international machine, local communities have no voice. Given this person works with aid agencies in Dar Fur, I am very worried about the future of the people there.

The greatest moment of what did you just say? I have ever experienced came near the end, when I compared oil companies such as Chevron to other extractive enterprises, such as Debeers. I hope that the Chevron representative was just ignorant of the previous practices of Debeers and other diamond companies when he suggested that we shouldn't give them such a hard time, since "didn't Debeers do good? Can't we find things they did that were of social value to local communities?" The World Bank representative then suggested that Debeers was forced to buy blood diamonds, and that they had no hand in the conflicts in Liberia and Seirra Leone. It was at this moment I paid for my 2 beers, thanked the guests, and left.

I guess I should feel privledged to have seen neocolonialism at work. Clearly, bad ideas can sound great over a beer in a dark bar, peppered with false statistics; this is the power of the soundbite.

I certainly don't believe that all businesses are evil; they are the engine of growth. I don't think though that we should trust them with social ends, especially when most can't even maximize shareholder value.

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A short bio

I am a consultant with the World Bank in DC and a recent PhD graduate of economics at the University of California, Irvine. My research is on conflict and post-conflict development, and the economic impact of the environment and environmental change. I am currently working on a randomized impact evaluation for the World Bank in the post-conflict area of northern Uganda.

My two favorite quotes

>> If you want to build a ship, don't drum up people to collect wood and don't assign them tasks and work, but rather teach them to long for the endless immensity of the sea. - Antoine de Saint-Exupery

>> One of Einstein's colleagues asked him for his telephone number one day. Einstein reached for a telephone directory and looked it up. "You don't remember your own number?" the man asked, startled.

"No," Einstein answered. "Why should I memorize something I can so easily get from a book?"